- The US Dollar turns flat ahead ater Durable Goods release.
- Market sentiment becomes unclear with investors awaiting further data in pivotal week.
- The US Dollar Index is back to flat and flirts with a leg higher towards 104.00.
The US Dollar (USD) is flat for this trading session just minutes after the US opening bell. The Greenback was able to recover earlier losses with Durable Goods triggering some US Dollar strength. Meanwhile some easing unfolded on the geopolitical front with both German Prime Minister Olaf Scholz and NATO Secretary General Jens Stoltenberg pushing against claims from French President Emmanuel Macron, repeating that no boots will be on the ground in Ukraine, despite harsh talk from Macron earlier that he would like to open the discussion on the topic.
On the economic front all eyes will now be on the sentiment numbers due to be released later this Tuesday’s session. Markets already heard Kansas City Federal Reserve Bank President Jeffrey Schmid, who said that the Fed should be patient and not adjust its policy preemptively. Later this Tuesday Michael Barr and Fed’s Vice Chair was supposed to make comments, though his speech did not hold any references on the markets.
Daily digest market movers: Durable Goods triggers stronger Greenback
- Kansas City Fed Jeffrey Schmid already kicked off this Tuesday with early comments, saying that the Fed should wait and not jump the gun on its disinflationary path.
- Around 13:30 GMT Durable Goods for January was released:
- Headline Durable Goods Orders went from a revised down -0.3{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea} to -6.1{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea}.
- Orders without Transportation went from -0.1{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea} to -0.3{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea}.
- All previous numbers were revised to the downside.
- At 13:55 the weekly Redbook was released, with 3{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea} as the previous number and 2.7{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea} for this week.
- Near 14:00 the Housing Price Index for December was released and went from a revised upwards 0.4{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea} to 0.1{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea}.
- Fed Vice Chairman Michael Barr did not leave any comments on monetary policy.
- Fast forward to 15:00 and the Consumer Confidence for February will be released. Previously it was at 114.8 with 115 projected. Additionally, the Richmond Fed Manufacturing Index for february will be released at that same time, with -15 printed previously and -4 forecasted.
- Last number for this Tuesday will be released at 15:30 with the Dallas Fed Manufacturing Business Index for February, previously in contraction at -27.4.
- Equities are mildly in the green after the Dow Jones snapped its three-day winning streak overnight. China is doing rather well, with both the Hang Seng and the Shenzhen Index both up near 1{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea}. European equities are mildly in the green with US futures still looking for direction.
- According to the CME Group’s FedWatch Tool, expectations for a Fed pause in the March 20 meeting are at 97.5{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea}, while chances of a rate cut stand at 2.5{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea}.
- The benchmark 10-year US Treasury Note trades around 4.26{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea}, and is dipping to session lows for this Tuesday.
US Dollar Index Technical Analysis: Small retreat ahead
The US Dollar Index (DXY) is having a difficult Tuesday where a handful of currencies are appreciating against the US Dollar, with the Japanese Yen leading the charge. This has pushed the DXY below the 200-day Simple Moving Average (SMA) at 103.73. The Durable Goods print this Tuesday could be enough of a catalyst to push the DXY all the way down to test 103.00.
To the upside, the 100-day Simple Moving Average (SMA) near 104.02 is the first level to watch as it is a support that has been turned into a resistance. Should the US Dollar be able to cross 104.60, 105.12 is the next key level to keep an eye on. One step beyond there comes 105.88, the high from November 2023. Ultimately, 107.20 – the high of 2023 – could even come back into scope, but that would be when markets reprice the timing of a Fed rate cut again, possibly delaying it to the last quarter of 2024.
Looking down, the 200-day Simple Moving Average at 103.73 was broken on Thursday and sees more US Dollar bears flock in to trade the break. The 200-day SMA should not let go that easily, so a small retreat back to that level could be more than granted. Ultimately, it will lose its force with the ongoing selling pressure and could fall to 103.16, the 55-day SMA before testing 103.00 as a level.
US Interest rates FAQs
Interest rates are charged by financial institutions on loans to borrowers and are paid as interest to savers and depositors. They are influenced by base lending rates, which are set by central banks in response to changes in the economy. Central banks normally have a mandate to ensure price stability, which in most cases means targeting a core inflation rate of around 2{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea}.
If inflation falls below target the central bank may cut base lending rates, with a view to stimulating lending and boosting the economy. If inflation rises substantially above 2{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea} it normally results in the central bank raising base lending rates in an attempt to lower inflation.
Higher interest rates generally help strengthen a country’s currency as they make it a more attractive place for global investors to park their money.
Higher interest rates overall weigh on the price of Gold because they increase the opportunity cost of holding Gold instead of investing in an interest-bearing asset or placing cash in the bank.
If interest rates are high that usually pushes up the price of the US Dollar (USD), and since Gold is priced in Dollars, this has the effect of lowering the price of Gold.
The Fed funds rate is the overnight rate at which US banks lend to each other. It is the oft-quoted headline rate set by the Federal Reserve at its FOMC meetings. It is set as a range, for example 4.75{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea}-5.00{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea}, though the upper limit (in that case 5.00{721fc769be108e463fe4e33f629fb22fe291c423a7a69eaaf65dcb28e9b05dea}) is the quoted figure.
Market expectations for future Fed funds rate are tracked by the CME FedWatch tool, which shapes how many financial markets behave in anticipation of future Federal Reserve monetary policy decisions.
